ECON 232 Chapter 11 Study Quiz
 
 
 
 
1.
Use the following diagrams for the U.S. economy to answer the following questions.

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Which of the above diagrams best portrays the effects of an increase in foreign spending on U.S. products?
A. A
B. B
C. C
D. D


 
2.
Use the following diagrams for the U.S. economy to answer the following questions.

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Which of the above diagrams best portrays the effects of an increase in resource productivity?
A. A
B. B
C. C
D. D


 
3. Other things equal, an improvement in productivity will:
A. tend to increase the equilibrium price level.
B. shift the aggregate supply curve to the left.
C. shift the aggregate supply curve to the right.
D. shift the aggregate demand curve to the left.

 
4.
Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question(s) on the basis of this information.
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The per unit cost of production in the economy described above is:
A. $.50.
B. $1.
C. $2.
D. $5.


 
5. A rightward shift in the aggregate supply curve is best explained by an increase in:
A. business taxes.
B. productivity.
C. nominal wages.
D. the price of imported resources.

 
6.
Answer the next question(s) on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy:

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The level of productivity in the above economy is:
A. 2.
B. .5.
C. 4.
D. 200.


 
7. The determinants of aggregate demand:
A. explain why the aggregate demand curve is downsloping.
B. explain shifts in the aggregate demand curve.
C. demonstrate why real output and the price level are inversely related.
D. include input prices and resource productivity.

 
8. Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?
A. a reduction in business taxes
B. production bottlenecks occurring when producers near full plant capacity
C. an increase in the price of imported resources
D. deregulation of industry

 
9.
Answer the next question(s) on the basis of the following information: An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labor, $3.
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Refer to the above information. As a result of the change indicated in the previous question, the aggregate:
A. supply curve would shift to the left.
B. supply curve would shift to the right.
C. demand curve would shift to the left.
D. demand curve would shift to the right.


 
10. (Advanced analysis) Suppose that the equation for aggregate supply in an economy is P = 125 + 0(Q), where P is the price level and Q is real GDP. Also, suppose that the MPC is 0.9 and the initial level of real GDP is $400 billion. After an increase in investment of $20 billion, real GDP and the price level will be:
A. $400 billion and 125.
B. $600 billion and 150.
C. $420 billion and 100.
D. $600 billion and 125.

 
11.

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Refer to the above diagram. Suppose that aggregate demand increased from AD1 to AD2. For the price level to stay constant:
A. the aggregate supply curve would have to shift rightward.
B. the aggregate supply curve would have to shift leftward.
C. real domestic output would have to remain constant.
D. the aggregate supply curve would have to be vertical.


 
12. The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:
A. increase the amount of U.S. real output purchased.
B. increase U.S. imports and decrease U.S. exports.
C. increase both U.S. imports and U.S. exports.
D. decrease both U.S. imports and U.S. exports.

 
13. An increase in business excise taxes will shift the aggregate supply curve leftward.
A. True
B. False

 
14. Other things equal, an outward shift of the production possibilities curve can be expected to:
A. shift the aggregate supply curve rightward.
B. shift the aggregate supply curve leftward.
C. shift the aggregate demand curve leftward.
D. increase the price level.
E. do none of the above.

 
15.

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Refer to the above diagram. The change in aggregate demand from AD1 to AD2:

 
16.

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Refer to the above diagram. The change in aggregate demand from AD5 to AD6:
A. would increase real output but not the price level because this change occurs in the horizontal range of the aggregate supply curve.
B. would increase the price level but not real output because this change occurs in the vertical range of the aggregate supply curve.
C. could not occur because real output is already at its absolute full-capacity level.
D. might have been caused by a decline in investment or government spending which is unrelated to the price level.


 
17. Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate:
A. demand curve will shift leftward.
B. supply curve will shift rightward.
C. supply curve will shift leftward.
D. expenditures curve will shift downward.

 
18. The fear of unwanted price wars may explain why many firms are reluctant to:
A. reduce wages when a decline in aggregate demand occurs.
B. reduce prices when a decline in aggregate demand occurs.
C. expand production capacity when an increase in aggregate demand occurs.
D. provide wage increases when labor productivity rises.

 
19. When aggregate demand declines, some firms may reduce employment rather than wages because wage reductions may:
A. not be possible due to the minimum wage law.
B. increase the cost of raising money capital.
C. reduce the demands for their products.
D. may set off a price war.

 
20. All else equal, an increase in imports will shift the aggregate expenditures curve:
A. upward and the aggregate demand curve rightward.
B. upward and the aggregate demand curve leftward.
C. downward and the aggregate demand curve rightward.
D. downward and the aggregate demand curve leftward.

 
21. Other things equal, an improvement in productivity will:
A. shift the aggregate demand curve to the left.
B. shift the aggregate supply curve to the left.
C. shift the aggregate supply curve to the right.
D. increase the price level.

 
22.
Answer the next question(s) on the basis of the following table for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of the other questions.

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Refer to the above table. If equilibrium real GDP is $31 billion in this country, its equilibrium price level will be:
A. 128.
B. 125.
C. 122.
D. 119.
E. 116.


 
23. Suppose the price level increases, but real output is unchanged. We can infer that:
A. aggregate demand has increased in the horizontal range of the aggregate supply curve.
B. aggregate demand has increased in the vertical range of the aggregate supply curve.
C. aggregate supply has increased in the horizontal range of the aggregate demand curve.
D. aggregate demand has decreased in the intermediate range of the aggregate supply curve.

 
24. Which one of the following would not shift the aggregate demand curve?
A. a change in the price level
B. depreciation of the international value of the dollar
C. a decline in the interest rate at each possible price level
D. an increase in personal income tax rates

 
25. The equilibrium price level and level of real output occur where:
A. real output is at its highest possible level.
B. exports equal imports.
C. the price level is at its lowest level.
D. the aggregate demand and supply curves intersect.

 
26. A decrease in per unit production costs will shift the aggregate supply curve leftward.
A. True
B. False

 
27.

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Refer to the above diagram of an economy's aggregate supply curve. This economy would experience less than full-employment output in:
A. range 1 only.
B. range 1 and part of range 2.
C. part of range 2 and all of range 3.
D. range 3 only.


 
28. In deriving the aggregate demand curve from the aggregate expenditures model we note that:
A. the real-balances effect is irrelevant to both models.
B. a change in the price level will have no impact on the aggregate expenditures schedule.
C. an increase (decrease) in the price levels shifts the aggregate expenditures schedule upward (downward).
D. an increase (decrease) in the price level shifts the aggregate expenditures schedule downward (upward).

 
29. The aggregate demand curve is:
A. vertical if full employment exists.
B. horizontal when there is considerable unemployment in the economy.
C. downsloping because of the interest-rate, real-balances, and foreign purchases effects.
D. downsloping because production costs decrease as real output rises.

 
30. If aggregate demand increases and, as a result, real output and employment increase but the price level remains unchanged, we can assume that:
A. the money supply has declined.
B. aggregate demand intersects aggregate supply in the horizontal range of the aggregate supply curve.
C. aggregate demand intersects aggregate supply in the intermediate range of the aggregate supply curve.
D. aggregate demand intersects aggregate supply in the vertical range of the aggregate supply curve.

 

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